Sleeping in Segovia, visiting Madrid and Toledo from there?...or sleep in Toledo?

All three are definitely worth a visit. Segovia is to the northwest of Madrid and Toledo is to the south. I would consider one night in each. You won't be doing any backtracking that way. If you want to be in a central location, I'd spend a night in Segovia and two in Madrid. I've been to Toledo several times, but never spent the night and I've heard it's quite magical after all the day trippers leave. That's why I suggest a night in all three. It isn't like spending a night in Madrid and then a night in Barcelona with hours of travel time. The distances are manageable. From Segovia to Madrid is an hour on the bus or half an hour on the train and the same on to Toledo.

You can take a bus or train from all these cities. You can do it without a rental car if you don't mind walking a bit. Finding parking is challenging in Toledo. You probably won't want to take a rental car into Madrid.

I hope this helps. If you ended up doing what you're planning and staying in Segovia for all three nights, that would work, but you would be doing some backtracking because of the locations.

Toledo is definitely worth an overnight stay. As noted by the other poster, the night visit is different than that of the day when most of the tourists are gone. I have been to Segovia several times and to Toledo and Madrid even more. Segovia, while very interesting, the place where Isabella the Catholic learned she was queen of Spain, does not have as much to offer as Toledo. Segovia has the two main attractions, The Cathederal and the Alcazar, and that is about it for a fast visit. Toledo has much much more. I would recommend one day in Segovia and then to Toledo and/or Madrid. Madrid is 1/2 hour via AVE train from Madrid and its Atocha Train Station. The Prado can be reached by foot or taxi from there. Toledo would be my base vs Segovia. And you are unable to take the car in to the historic area of Toledo - not permitted, and the streets are very very narrow anyway.

Unpack once and day trip out of Toledo.

I really liked sleeping in Toledo, we found a great hotel for much less than we paid at a crummy hotel in Madrid.

I might suggest staying in Toledo and make daytrips to Madrid and Segovia. Segovia, while very nice, doesn't have nearly as much to offer in a longer stay and Toledo is really much better in the early evening and early mornings. And it's an easier bus or train trip into Madrid than it is from Segovia. A car inside Toledo is not so good, but you can either park in a perimeter lot or even better, stay at the parador just outside the walls or at one of the nearby inns.

If you drive then to Segovia for a day, it's small enough to see the sights in a morning or afternoon and spend the other half at Escorial.

I also vote for staying in Toledo and doing day trips to Madrid, or stay in Madrid and do day trips. The train from Toledo to Madrid only took about 40 minutes. I loved Toledo! One of my favourite places so far. I would highly recommend you go to Toledo.

Allow at least 1/2 a day to the Prado. I found Madrid very easy to get around in so wouldn’t hesitate to recommend staying there. You can purchase your tickets to the Prado day prior online. I would HIGHLY recommend that! Otherwise you will be stuck in a very long line. I was staying in an area not that close to the city centre but got around very easily on the metro. There were some really nice hostals closer to the centre of Madrid that looked nice and were reasonable. Madrid just looks huge on a map. I covered most of it in 3 days, walking everywhere. You don’t need a car, and would be a pain to park. Toledo is a walking place. Cars aren’t even allowed in some parts of the city.

Turn the car in in Madrid, stay there and take trains for day trips. It will make your life easier!

On our last visit last November, we left our week-long Madrid apartment for one night in order to stay in Segovia. The town has several "minor" sights in addition to the two mentioned above, and is in a truly spectacular setting in high hills, so the town itself is an attraction. If we'd had more time, we would've allowed for more time in Segovia.

Toledo was a worthwhile day trip out of Madrid, and we returned to Madrid for the night, but it would've been nice, again, to have more time an an opportunity to spend more time there.

Madrid is huge, but it's a "happening" place, and is central to the other two. If you're using a rental car the whole time, be aware that much of Segovia and Toledo are narrow, winding streets. Madrid has the traffic that comes with a large capitol. We used public transportation for all three, and both the train and bus stations in Segovia and Toledo are a bit out of the town center, which may be worth considering.